Had it ever happened to you that the tax you had to pay suddenly posed a problem for your company and its payment would mean a serious intervention into your finances? In today's time of significant increases in energy prices, materials and other costs, we are encountering these situations more and more often.

We will advise you on how to proceed so that you have tax obligations fulfilled in accordance with the law within the limits of your cash flow.

The legal institute to help you in this case is the institute of tax deferral or payment of tax in installments.

Deferment of tax payment means that a specific tax liability will be paid in a new, later due date in a lump sum. Payment of tax in installments means that a specific tax liability will be paid in several partial installments within a specified due date for each installment separately.

The tax administrator may, at your request, allow the tax to be deferred or paid in installments as a tax entity, for a maximum of 24 months from the due date of the tax or the difference between the tax levied and the earliest from the due date of the tax.

Based on the Tax Act, the Financial Directorate of the Slovak Republic determines the conditions under which the tax administrator may allow the deferral of tax payment or allow the payment of tax in installments. It then publishes these conditions on its website.

Currently, tax deferral or installment tax may be granted if at least one of the following conditions is met:

1. the payment of the tax would jeopardize the maintenance of the taxable person or his dependents;
2. the taxable person's income has fallen and therefore the tax cannot be expected to be paid on time, mainly due to an emergency situation such as a pandemic or natural disaster;
3. payment of the tax would increase the insolvency of the tax subject in the event of a significant reduction or interruption of business activities on the basis of decisions taken by the Government of the Slovak Republic;
4. other demonstrable reasons of a serious nature for which the tax cannot be paid.

The fulfillment of the condition relied on by the taxable person in his application must be proved by appropriate evidence.

As of March 17, 2022, the tax administrator does not assess the fulfillment of the conditions specified in the application, for applications submitted by a tax entity with a tax reliability index of "highly reliable". Read our article on the Tax Reliability Index Tax Reliability Index - what to do if you do not agree with it.

If the request for a tax deferral, resp. for permission to pay the tax in installments has such deficiencies for which it will not be eligible for negotiation, the tax entity will be called by the tax administrator to eliminate these deficiencies within the period specified by the tax administrator. If the tax subject eliminates the deficiencies of the application, the tax administrator will consider such an application to be submitted without deficiencies and will act in the given matter. If the taxable person does not eliminate the deficiencies of the application, this application shall be deemed not to have been filed and the tax administrator shall notify the taxable person of this fact. In the application, it is necessary, among other things, to propose a deadline for tax deferral, resp. the amount of the installments and their due date.

For the period of permitted deferral of payment of tax or payment of tax in installments, the tax subject shall pay interest on the amount of deferred tax or on the amount of permitted installments. The interest rate to be used shall be three times the basic interest rate of the European Central Bank applicable on the day following that on which the tax is due; if three times the European Central Bank's key interest rate does not reach 3%, the annual interest rate of 3% shall be used instead of three times the European Central Bank's key interest rate.

The same procedure applies to the authorization of deferral of payment of tax arrears or to the authorization of payment of tax arrears in installments.

For the sake of completeness, we state that the Tax Code distinguishes between tax until the due date (the so-called tax receivable from the point of view of the tax administrator) and tax arrears, which is the amount of tax after the due date of the tax. For example, your VAT tax liability for the tax period March 2022, filed April 21, 2022, will be a tax claim of the tax administrator in the period from April 21, 2022 to April 25, 20222, and in the event of non-payment by April 25, 2022, the tax liability will become a tax arrears. An application for a tax / tax arrears clearance or for a tax / arrears in installments may be submitted both by the tax due date and later, after the tax due date, in both cases the taxable entity seeks to resolve the same situation, that the tax will not or has not been paid by the due date of the tax.